Appellees are individual investors in Brownsville, Texas, who suffered financial losses as the alleged result of unauthorized, fraudulent transactions in securities. Approximately $190,000 was invested by the Rodriguez De Quijas family; $38,000 by Mary Grace Norman; $100,000 by Adelina Trapero; and $80,000 by Gene and Gertrud Griffin. They sued appellants Jon Grady Deaton, the agent in charge of the accounts, and Shearson/American Express, Inc. ("Shearson"), pleading violations of various state and federal laws.1 Appellant Shearson moved to compel arbitration pursuant to an arbitration clause contained in the customer agreements signed by each appellee,2 and in accordance with the Federal Arbitration Act.3 The district court ordered arbitration of all claims except for the federal securities claims.

Appellees do not contest the arbitrability of their Exchange Act claims following McMahon. They argue only that Wilko remains good law and prohibits arbitration of claims brought under Sec. 12(2) of the Securities Act. Appellees argue further that even if Sec. 12(2) claims are arbitrable, the parties lacked the requisite intent to agree to arbitration. We address these claims.

II.

5

The Supreme Court in McMahon, enforced a predispute agreement to arbitrate claims brought under Sec. 10(b) of the 1934 Exchange Act. Supra, --- U.S. at ----, 107 S.Ct. at 2343. In doing so, it refused under the 1934 Act to follow the reasoning of Wilko v. Swan, which invalidated predispute agreements to arbitrate 1933 Act claims. Wilko, supra, at 438, 74 S.Ct. at 188-89. The McMahon majority opinion does not expressly overrule Wilko; the precise issue of the arbitrability of Sec. 12(2) claims was not before the court.4 Nevertheless, the reasoning in McMahon completely undermined Wilko, as this Court noted in Noble v. Drexel Burnham Lambert, Inc., 823 F.2d 849, 850 n. 3. (5th Cir.1987) ("McMahon undercuts every aspect of Wilko v. Swan ...; a formal overruling of Wilko, appears inevitable--or, perhaps, superfluous.").

6

The basic premise of Wilko is that a predispute agreement to arbitrate Sec. 12(2) claims is invalid by virtue of Sec. 14 of the Securities Act, 15 U.S.C. Sec. 77n. (1982). Section 14 voids any stipulation "to waive compliance with any provision" of the Securities Act. The Wilko court held the jurisdictional provision of the Securities Act to be the type of non-waivable provision contemplated in Sec. 14. Wilko, supra, 346 U.S. at 434, 74 S.Ct. at 186. The Supreme Court states in McMahon, however, that Sec. 29(a) of the Exchange Act, 15 U.S.C. Sec. 78cc(a) (1982), which is a non-waiver provision virtually identical to Sec. 14 of the Securities Act, does not bar predispute arbitration agreements. McMahon, supra, --- U.S. at ----, 107 S.Ct. at 2338-39.5

Appellees argue, however, that congressional intent is the crucial distinction between the two Acts. They claim that Congress, by preserving Wilko in the 1975 revisions of the Exchange Act, manifested its intent that at least Sec. 12(2) claims should remain non-arbitrable.6 We find it implausible that Congress intended to prohibit arbitration of Securities Act claims but intended to allow courts to determine the arbitrability of Exchange Act claims.7 Similarly fine distinctions between the two Acts have been presented throughout the course of the debate over securities arbitration. See, e.g., McMahon, supra, at ----, 107 S.Ct. at 2347 n.n. 1-2 (Blackmun J., dissenting). We do not, however, find these asserted distinctions controlling on the issue of arbitration. The Supreme Court opinion in McMahon, which binds us here, turns solely on the adequacy of arbitration to resolve securities disputes. It does not distinguish between the Exchange Act and the Securities Act. Furthermore, it has been the position of this Court that, for the purposes of arbitration, similarities between the Securities Act and the Exchange Act outweigh any differences between them. Sibley v. Tandy Corp., 543 F.2d 540, 543 n. 3 (1976). We thus follow the reasoning of the Supreme Court in McMahon and our own decision in Noble which lead directly to the obsolescence of Wilko and the arbitrability of Securities Act Sec. 12(2) claims.

III.

9

Appellees claim that even if Sec. 12(2) claims are arbitrable, the intent to agree to arbitration was lacking in their cases. At the time the agreements were signed, claim appellees, Securities Act claims were controlled by Wilko and clearly were not subject to arbitration. We cannot conclude that appellees lacked the intent to agree to arbitration because, at the time the customer agreements were signed, courts refused to honor clauses compelling arbitration of securities claims. At the time the contracts were signed, the same circumstances existed barring arbitration of Exchange Act claims. E.g. Sibley, supra, at 543. But appellees cannot now contend that they lacked the intent to arbitrate their Exchange Act claims in view of the Court's holding in McMahon. Neither the Supreme Court nor this Circuit considered the earlier lack of authorization to be an obstacle in McMahon, supra or Noble, supra. Both cases ordered arbitration of Exchange Act claims under analogous circumstances.

10

Authority no longer exists to deny arbitration of the Sec. 12(2) claims, as the parties agreed in their contracts. Arbitration must be directed both as to the Securities Act claims and Exchange Act claims. That portion of the judgment of the district court which denied directing arbitration of the Securities Act Sec. 12(2) and the Securities and Exchange Act Sec. 10(b) claims is

Their common claims include violations of Secs. 12(2) and 17(a) of the 1933 Securities Act, and Secs. 10(b), 15(c)(1), 15(c)(2) of the Securities Exchange Act of 1934; civil RICO violations consisting of mail and wire fraud under 18 U.S.C. Secs. 1341, 1343, and 1961 (1982); securities fraud in violation of TEX.REV.CIV.STAT.ANN. Sec. 581-33(A)(2) (Vernon 1964); violations of the Texas Deceptive Trade Practices Act, TEX.BUS. and COMM. CODE ANN. Sec. 17.46 et seq. (Vernon 1986); and common law breach of contract, fraud, and misrepresentation. The district court properly dismissed appellees' Securities Act Sec. 17(a) claims under Fed.R.Civ.P. 12(b)(6), because this Court has held that there is no such private cause of action. Landry v. All American Assurance Co., 688 F.2d 381 (5th Cir.1982)

Unless unenforceable due to federal or state law, any controversy arising out of or relating to my accounts, the transactions with you for me, or to this agreement or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the National Association of Securities Dealers, Inc., or the Boards of Directors of the New York Stock Exchange, Inc. and/or the American Stock Exchange, Inc. as I may elect. If I do not make such election by registered mail addressed to you at your main office within five (5) days after demand by you that I make such election then you may make such election. Judgment upon any award ordered by the arbitrators may be entered in any court having jurisdiction thereof.

Sec. 2. Validity, irrevocability, and enforcement of agreements to arbitrate

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration on a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part, thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

The McMahon court reasons that Sec. 29(a) voids only those agreements which waive "compliance" with provisions of the Exchange Act, and that because the jurisdictional provision of the Exchange Act does not impose substantive obligations with which to comply, nothing prevents its waiver. Supra, --- U.S. at ----, 107 S.Ct. at 2338. Section 27, the jurisdictional provision of the Exchange Act, 15 U.S.C. Sec. 78aa (1982), is similar to the jurisdictional provision of the Securities Act. Section 27 of the Exchange Act states in part:

The district courts of the United States ... shall have exclusive jurisdiction of violations of this title or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this title or the rules and regulations thereunder.

The district courts of the United States ... shall have jurisdiction ... concurrent with State and Territorial courts, of all suits in equity and actions at law brought to enforce any liability or duty created by this subchapter. Any such suit or action may be brought in the district wherein the defendant is found or is an inhabitant or transacts business, or in the district where the sale took place, if the defendant participated therein, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found.

The Conference Report accompanying the amendments to Sec. 28(b) of the Exchange Act, 15 U.S.C. Sec. 78bb(b), reads as follows:

It was the clear understanding of the conferees that this amendment did not change existing law, as articulated in Wilko v. Swan, 346 U.S. 427 [74 S.Ct. 182, 98 L.Ed. 168] (1953), concerning the effect of arbitration proceedings provisions in agreements entered into by persons dealing with members and participants of self-regulatory organizations.